CODE 18-77
Mr Holroyd
HKD
HKC. 105/1
Reference
34
EXCHANGE FUND ORDINANCE
1.
APPROVED INSTRUMENTS
(ref Holroyd's mile
13 July-22
In principle, a loan which is covered by a debenture constitutes a "security", and therefore it should fall within section 3 (2) of the Ordinance.
2.
However, Hong Kong in their telno 2034 could hardly have given us less information about the arrangements to be made, and indeed it is clear that the documentation is not yet even prepared. Moreover, I assume that you would want to know a little more about the financial background before giving approval; for example it seems rather remarkable that the costs should have doubled in only 12 months.
3.
I suggest, therefore, that we tell Hong Kong that, whilst in principle it looks as if the arrangement will be one which we might be able to approve, we would want to be satisfied that the documentation, when eventually produced, gave Hong Kong adequate security for its loan. You may wish to add a query on the policy side about the large increase in the costs.
14 July 1989
C.A. Whomesley
C A Whomersley Legal Advisers K174 270 3075